RMC: takeover bid from CRH?

Published:
08 September 2004

Shares in RMC Group PLC gained in early trade as dealers mulled UK news reports that the cement group could soon be on the receiving end of a UK£2.1bn cash bid, worth 800 pence per share. Traders at a merger arbitrage boutique noted that CRH PLC has often been cited as a potential predator for RMC, though the traders also pointed out a shortage of cement in some regions may also be driving RMC shares higher.

More informed analysts were however sceptical about any bid for RMC by CRH, arguing that the Irish construction group would be unlikely to want to commit to such a risky deal, and nor would it be keen to spend more than UK£500-600m on any acquisition.

Analysts estimated that RMC would have a take-out value of around UK£2-3bn, way above what CRH would be willing to spend. A more likely scenario, in analysts’ view, would be for CRH to buy one or two assets from RMC instead. Whether RMC could attract other potential bidders was also deemed to be far fetched, partly due to the inherent difficulty in valuing the German unit. RMC could possibly attempt to sell off the German division, though analysts highlighted that the group had to scrap disposal plans last year when no buyer could be found.